Wireless, Cable Associations Challenge FCC's Net Neutrality Rules

The number of appeals is mounting. AT&T on Tuesday became the first major ISP to appeal, also filing its petition for review in the D.C. Circuit and making similar arguments as the trade association. Alamo Broadband also refiled its appeal of the order in the 5th Circuit (see 1503230066). USTelecom filed an appeal Monday in the D.C. Circuit (see 1504130041).

Industry lawyers said the CTIA challenge could be particularly significant since imposing the rules on mobility could be a pressure point for the order when it's before an appellate court. CTIA filed a two-page petition for review with the D.C. Circuit, arguing that the February order is “arbitrary and capricious,” an “abuse of discretion” in violation of the Administrative Procedure Act and a violation of other laws.

“Instead of letting consumers decide the success of new, innovative mobile services, government bureaucrats will now play that role,” said CTIA Chairman Ron Smith, CEO of Bluegrass Cellular, in a news release. “National, regional and rural wireless carriers will spend substantial time and resources trying to comply with the new vague and overbroad rules. CTIA’s member companies should be focused on meeting consumers’ growing demand for mobile data and creating new offerings.”

Michael Kellogg, a former federal prosecutor and clerk to William Rehnquist when he was an associate justice at the Supreme Court, is the lead lawyer for CTIA on the appeal. He's a founder of Kellogg Huber and an appellate specialist. CTIA President Meredith Baker voted against the 2010 net neutrality order as a member of the FCC.

Daniel Lyons, associate professor at Boston College Law School, said the mobile challenge to the order could be critical. “The FCC has repeatedly highlighted the lack of competition in broadband markets, the idea that most consumers only have at most two choices for broadband service, the telephone company and the cable company,” Lyons told us. “Now, we can debate whether that duopoly assumption is valid, and if so, whether duopoly will trend toward competition or cooperation.” Lyons said with four national carriers as well as regional players, wireless is “unquestionably competitive” and the duopoly argument doesn’t stand up.

The mobile challenge also raises important technical questions, Lyons said. “Spectrum is limited,” he said. “Capacity issues cannot be solved simply by laying more cable, which suggests a greater need for wireless providers to manage traffic to optimize network operations.” Lyons also said the mobile challenge could be key in having the case heard in the D.C. Circuit, which has “exclusive jurisdiction over changes to wireless license terms.” Verizon had made that argument in its challenge to the 2010 net neutrality order, he said.

FCC Had a Choice

NCTA President Michael Powell told reporters that as a D.C.-based association it was required to file in D.C. Powell is a former chairman of the FCC. The agency and Communications Act Title II reclassification proponents have argued that the net neutrality order laid out a path set by the court in overturning the 2010 open Internet order by reclassifying broadband. The court had objected to imposing common carrier restrictions on broadband without classifying them under Title II.

Powell responded during a Tuesday press call that the court also laid out a path to base net neutrality rules on Section 706 of the Telecom Act, and that Wheeler, before endorsing the Title II path, had said as much. Powell argued reclassification did “serious violence” to the regulatory scheme Congress created in the Telecommunications Act, “and in effect rewrote an Act of Congress, which an agency is not allowed to do.” Congress had “consciously” created different regulatory approaches to telephone services, which it subjected to stronger regulations, than to “more modern, dynamic and innovative” information services.

Representing NCTA in the appeal are former U.S. Solicitor General Theodore Olson and former U.S. Assistant to the Solicitor General Miguel Estrada, of Gibson Dunn. Powell, during the press call, stopped short of predicting the case would go to the Supreme Court, but said because the “stakes are high enough,” and the “seminal guidance” in the case is the Brand X decision, it’s “probably likely” one side or the other would give “serious consideration to petitioning the high court for review.”

Powell also urged Congress to settle the debate through bipartisan legislatio​n and argued it’s in the interest of net neutrality supporters to back a compromise. Saying various aspects of the order are legally vulnerable, Powell said: “The only way to make sure everybody gets what they want in a permanent and enduring way is for Congress to pick up the mantle.” Powell also said a future FCC could change the order, and if the order is thrown out or remanded by the courts, there’s no guarantee the current administration would still be around “to pick up the pieces.”

American Cable Association President Matthew Polka called reclassification “legally unsupportable and a step backward.” Title I had given cable operators “the proper balance of ensuring consumers have open access to the Internet while giving providers the proper incentives to bringing high-performance broadband services to nearly every corner of the country," he said.

Mother May I Regulations

Reclassifying all broadband, mobile and fixed, as a common carrier service “subjects mobile providers, for the first time, to 'mother-may-I-innovate' permission-seeking requirements imposed by the government,” said former FCC Commissioner Robert McDowell, now at Wiley Rein. “These will disproportionately and irreparably harm smaller wireless carriers that simply do not have the resources to fight, or perhaps even comply with this Byzantine and evolving rulebook,” he said.

Unlike the 2010 order, the February order doesn’t take into account that mobile is different, McDowell said. “The order also does a poor job of trying to explain how the FCC can justify reversing itself and suddenly interpret the plain language of [Telecom Act Section] 332 to mean that it no longer says what Congress clearly articulated, namely that wireless broadband should not be regulated like common carriers,” he said. The order “arbitrarily” redefines the public switched telephone network (PSTN) as the public switched network (PSN) through “a breezy wave of the hand,” McDowell said. “Smaller carriers will be especially hurt by these legal contortions."

Of all the “substantive and procedural problems” with the order, the FCC’s assertion that “mobile broadband is an interconnected commercial mobile service stands out as the most absurd,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation: “Changing the definition of ‘public switched network’ strikes me as a rather craven end-run around good process for a result that is clearly contrary to congressional intent.” Wireless carriers face a growing number of apps and devices and need flexibility to manage their networks, he said. “Wireless technology is rapidly advancing, and the order risks stifling advances in both access technology and business models by requiring the FCC’s permission before innovating.”

“Wheeler left CTIA before the iPhone and left NCTA before the cable modem, so broadband is uncharted waters for him,” said Richard Bennett, a visiting fellow at the American Enterprise Institute. “Mobile broadband is an entirely different service than wired broadband, so it has never made any sense to impose wire-driven rules in the mobile space.”

But Free Press Policy Director Matt Wood said Title II isn't confined to monopolies or duopolies. “It protects against unreasonable discrimination in all telecom services, including wireless voice, where we see the same four national carriers plus the regional carriers,” Wood said. “We don't let carriers in that circumstance compete on who blocks least, and we shouldn't let them do that with broadband either.” Section 332 has nothing to say about broadband, Wood said. Congress wrote the section in 1993 “preserving the distinction between commercial systems and closed, private radio systems like taxi and police dispatches.”

The FCC repeated its statement from Monday, after USTelecom’s appeal, that it's “confident the FCC's new Open Internet rules will be upheld by the courts.” The trade associations already made their arguments during the rulemaking “and they’re not compelling,” Public Knowledge said. “They’re not going to pull any rabbits out of their hats. So although litigation is inherently uncertain and risky to a degree, we think the odds of the FCC being upheld are pretty high.”